Is Your Money in Escrow? How RERA's Separate Account and Withdrawal Checks Work in Bengaluru
A Bengaluru buyer's guide to how RERA's separate project account actually works: why MoHUA says it is not an escrow, what the money can be used for, how withdrawals are tied to completion and certified, what the annual audit checks, and what to ask before paying.
Picture a Bengaluru buyer at a sales office, cheque book in hand, asking a simple question: is my money going into the escrow account? The sales executive says yes, every rupee is protected under RERA. The buyer feels reassured and signs. It is only later, reading about the rule, that the buyer realises the account RERA describes is not quite what either of them meant by escrow, and that the protection works in a different way.
The short answer. The Ministry of Housing and Urban Affairs' FAQs on the RERA Act say Section 4(2)(l)(D) requires the promoter to keep a separate bank account for every project and deposit 70 percent of the money received from allottees in it, for construction and land cost only. The FAQs say this account is self maintained and is not an escrow account requiring the Authority's approval for each withdrawal. Instead, withdrawals must be in proportion to the project's percentage of completion and certified by an engineer, an architect and a chartered accountant in practice, with an annual audit. The trade-off: the system lets construction money move without waiting for a regulator's sign off, but it relies on professional certification and audit, so a buyer gets the most from it by checking what the promoter discloses rather than assuming a regulator approves every payment.
Is the RERA account an escrow account?
Not in the sense the word usually suggests. The Ministry of Housing and Urban Affairs' FAQs on the RERA Act, dated July 2025, say Section 4(2)(l)(D) provides that the promoter shall maintain a separate bank account for every project, in which 70 percent of the money received from allottees is deposited for construction and land cost. The FAQs then say plainly that the account has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal.
That distinction matters. If you picture a regulator approving each withdrawal, you might assume that money in the account is frozen until someone at the Authority signs off. The FAQs describe a different design. The promoter operates the account, and the safeguards are in what the money can be used for, how much can be withdrawn and who has to certify it.
We covered the 70 percent rule itself in our guide to RERA's separate account rule for Bengaluru buyers. This guide looks at the checks that sit around withdrawals.
What can the money in the account be used for?
Construction and land cost, and nothing else. The FAQs say Section 4(2)(l)(D) clearly provides that the funds can only be used for construction and land cost. Money from the account cannot lawfully be used for unrelated purposes under the Act.
The FAQs also say the account must be maintained for every project the promoter undertakes. A promoter running several projects in Bengaluru therefore needs a separate account for each, so that buyers' money for one project is kept apart from another's.
There is one exception the FAQs mention. Where a development authority is constructing a project from its own funds and is not collecting any amount from buyers, the FAQs say the Real Estate Regulatory Authority may grant an exemption from opening the separate account on a case to case basis. For a private project collecting money from buyers, the requirement applies.
How much can the builder withdraw, and when?
In proportion to completion. The FAQs say that under the first and second provisos to Section 4(2)(l)(D), the promoter is required to withdraw amounts from the separate account to cover the cost of the project in proportion to the percentage of completion of the project.
The FAQs add that the promoter is permitted to withdraw from the separate account after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion. So each withdrawal rests on certification by three professionals.
The link to completion is the core of the protection. A project that has stalled at a low percentage of completion should not, under the Act, be able to draw down most of the money in its separate account.
It also explains why buyers should pay attention to construction linked demands. When you pay an instalment, 70 percent of it goes into the separate account, but the promoter's ability to draw that money out depends on certified progress, not on the date of your payment. Progress on site and progress on paper should tell the same story.
How do the safeguards compare?
The table below sets out the rules on the separate account as the MoHUA FAQs describe them:
| Safeguard | What the FAQs say | What it means for a buyer |
|---|---|---|
| Amount to be deposited | 70% of money received from allottees | On an illustrative Rs 10 lakh instalment, Rs 7 lakh goes to the account |
| Permitted use | Construction and land cost only | Not for unrelated spending under the Act |
| Who approves withdrawals | Self maintained, not an escrow needing the Authority's approval | No regulator sign off on each withdrawal |
| Withdrawal limit | In proportion to the percentage of completion | Withdrawals should track physical progress |
| Checks | Engineer, architect and chartered accountant certify; annual audit within six months | Professional certification and audit, not approval |
The Rs 10 lakh instalment is an assumed figure used only to show the arithmetic of the 70 percent rule.
What does the annual audit check?
Whether the money went where it should. The FAQs say that under the third proviso to Section 4(2)(l)(D), the promoter is required to get its accounts audited within six months after the end of every financial year by a chartered accountant in practice, and to produce a statement of accounts duly certified and signed by that chartered accountant.
The FAQs say the audit must verify that the amounts collected for a particular project have been used for that project, and that withdrawals have complied with the proportion to the percentage of completion. In other words, the audit tests the two rules that matter most to buyers: money stays with its project, and withdrawals follow progress.
For a buyer, the audit is a backstop rather than a real time check. It looks back over a financial year. That is why the regular disclosures a promoter makes during the year are also worth reading.
If you suspect that money is not being handled as the Act requires, you are not limited to waiting for the audit. The FAQs say Sections 35 to 38 give the Regulatory Authority powers to call for information, conduct investigations, issue interim orders or directions, and impose penalties or interest. The FAQs also say Section 31 allows an aggrieved person to file a complaint with the Regulatory Authority or the Adjudicating Officer, as the case may be, in the form and manner set by the state's rules. A complaint backed by demand letters, receipts and the promoter's own disclosures is easier for the Authority to act on than a general concern.
Where can a buyer see what the promoter discloses?
On the Authority's website. The FAQs say that under Section 34, the Authority's website must show the details of all registered projects, and details of projects whose registration has been revoked or which have been penalised under the Act. The FAQs also say that under Section 11, the promoter must update all project information furnished at the time of application on the Authority's website, and that Section 11 also provides for certain information to be updated quarterly, so that buyers can make an informed choice. The FAQs say Sections 4 and 11 set out a detailed list of disclosures for public viewing, with the full list specified in the rules.
We explained how to read these updates in our guide to a project's RERA web page and quarterly updates. Comparing reported progress over several quarters gives you a sense of whether construction is moving in step with the demands you are paying.
The same habit applies whether you are considering a large township or a single project such as Purva Parc in Balagere, Whitefield: look at what the promoter has disclosed to the Authority, not only at what the brochure says.
What should you check before paying the next instalment?
Use this list alongside each demand letter:
- Confirm the project's RERA registration number and open its page on the Authority's website.
- Read the latest quarterly update on construction progress.
- Compare the stage in the demand letter with the progress the promoter has disclosed.
- Ask the promoter which bank account receives your payment for this project.
- Ask whether recent withdrawals were certified by an engineer, architect and chartered accountant.
- Ask whether the last annual audit of the project's accounts has been completed.
- Keep every demand letter, receipt and reply with your booking papers.
A promoter that follows the Act should be able to answer these questions without difficulty.
Frequently asked questions
Is the RERA 70 percent account an escrow account?
No. MoHUA's FAQs on the RERA Act say the separate bank account under Section 4(2)(l)(D) is self maintained and is not an escrow account requiring the Authority's approval for withdrawal. The promoter must deposit 70 percent of the money received from allottees in it, for construction and land cost only.
Who certifies a builder's withdrawals from the separate account?
An engineer, an architect and a chartered accountant in practice. MoHUA's FAQs say the promoter may withdraw from the separate account after these three certify that the withdrawal is in proportion to the percentage of completion of the project, and that withdrawals must cover the cost of the project in that proportion.
Does a builder have to get the project accounts audited every year?
Yes. MoHUA's FAQs say the promoter must get its accounts audited within six months after the end of every financial year by a chartered accountant in practice, and produce a certified statement of accounts. The audit must verify that money collected for a project was used for it and withdrawals followed completion.
Does every project need its own separate account?
Yes. MoHUA's FAQs say Section 4(2)(l)(D) requires the promoter to maintain a separate bank account for every project it undertakes. Where a development authority builds from its own funds and collects nothing from buyers, the FAQs say the Authority may grant an exemption from this requirement case by case.
Last updated 2026-10-20. PropNewz Team.
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